“The cliché advertiser mission is to send the right message to the right person at the right time at the right place,” stated AdMonsters Editorial Director Gavin Dunaway at a recent Think Tank, where product managers and CTOs from a variety of SSPs and exchanges discussed the future of the programmatic ecosystem. “SSPs and exchanges have long been tasked with ensuring ad buyers know that those opportunities are available.
“But take that a step further—how do we get the right piece of inventory with the right person at the right time to the bidder?” he continued. “Is that a pipe dream—or a necessity as infrastructure costs and buy-side cries for waste reduction and de-duplication mount?”
The supply-side partners in the discussion group seemed to lean toward “necessity.” As the conversation progressed, it became clear that the relationship between SSPs and DSPs was central to a solution. The antiquated idea that SSPs are publisher defenders and DSPs are buyer advocates has created a gulf—one might say a black hole of pricing machinations and Russian-Doll-style auctions that threatens to suck away the benefits of the open ecosystem entirely.
Key to bridging that gap—or plugging the black hole—is traffic shaping.
Adversaries or Allies?
Historically, the relationship between the DSPs and SSPs has been complex and somewhat adversarial—DSPs help advertisers find their most desirable audiences at the lowest price point, while SSPs want to help publishers reach the highest bidder and best monetize their inventory. But the rise of header bidding eclipsed the waterfall and vastly changed the nature of the relationship between SSPs and both buyers and sellers.
For instance, DSPs no longer have to work with various SSPs just to make sure they’re at the top of different publishers’ waterfalls. Meanwhile, publishers can expect better results by working with many SSPs simultaneously and opening up new avenues of demand. Individual SSPs lost a lot of the power they had with publishers back in the waterfall days and found themselves in greater competition for demand. This has somewhat commoditized supply, leading to massive duplications of auctions, and all the nasty infrastructure costs that follow.
With the amount of DSPs rapidly shrinking and SSPs increasingly appealing directly to buyers and agencies, the working relationship between DSPs and SSPs has become even further strained. There’s a lot of frustration over how roles are defined between DSPs and SSPs when it comes to bid optimization, particularly as the industry made the leap from second-price to first-price auctions.
The switch came along awkwardly, with many SSPs admittedly not being transparent about when first-price auctions were employed. To avoid over-paying for inventory, bid shading emerged as a standard practice for buyers—in effect, we’re still using second-price tools for a first-price world.
The lack of transparency and pricing gamesmanship are holding back progress in programmatic and sustaining the outdated adversarial relationship. As the walled gardens close in on the open programmatic space, SSPs and DSPs need to become more allied, thinking less about their proximity to publishers or buyers, but focusing on enriching the benefits of the open marketplace.
“One of the big challenges is that algorithmic optimization is, by definition, not transparent,” said Tom Kershaw, CTO, Magnite (fka Rubicon Project/Telaria). “But I think the idea that we should get rid of algorithmic optimization and go back to manual configurations through UIs is not an option for our industry. The ship has sailed on that—we are going to be in an algorithmically optimized environment. And if we’re not, we’re not going to be here. So we have to figure out a way to do that in a transparent manner.”
United by Traffic Shaping
On the road to transparency, one of the strategies that marketers and agencies are steadily employing is Supply Path Optimization (SPO), which entails finding or negotiating a direct path to supply by cutting out unnecessary intermediaries and reducing duplication.
But many see SPO as a weaponized transactional approach that can cut out competitors without the greatest benefit to publishers or advertisers—it almost echoes old waterfall tactics. SPO also puts a burden on the algorithm-reliant DSPs because of a lot of manual decision-making, and necessitates a fair deal of negotiation.
Traffic shaping is an alternative practice that has been cropping up in the ad tech lexicon as a method for increasing efficiencies between the supply and demand sides. For example, Rivr’s AI-powered traffic-shaping tech plugs into the SSP stack to dynamically reduce waste for both SSPs and DSPs by optimizing the exchange to hand-pick bidders based on audience-level analysis and the demand side’s intent to bid.
CTO Moti Tal mentioned that Rivr predicts which bidders are most likely to result in success per individual auction, and then sends the request only to the fitting demand partners, compacting the bid stream and reducing waste to all parties involved.
The group suggested there are two types of traffic shaping: automated and explicit. While explicit controls can create transparency for the buy side, it’s a great deal of work to make sure campaigns are adapting to the realities of the bidstream while also meeting requirements. Explicit controls are not always beneficial to DSPs as it may disrupt their ability to fulfill campaigns in an efficient manner.
What’s more important—and which often gets lost in the quest for transparency—is that the goals of the models are transparent rather than the models themselves. And the goals are more straightforward: maximizing spend, minimizing the bid required to win, etc.
The conversation made clear that the traffic-shaping onus falls squarely on the SSP. But using algorithms or machine-learning-driven tools to direct ad calls to the most relevant bidders both increases efficiencies and avoids the “unfair” aspects of SPO.
Publishers Get Realistic
Header bidding opened the auction floodgates, increasing the QPS weight for DSPs and competition among SSPs. As publishers integrate a slew of partners into their headers, there’s an expectation that every piece of inventory, no matter the quality, will be available to any and every advertiser.
Publishers count on bid density to drive up CPMs, and traffic shaping could put a dent in that practice. But it’s high time publishers understand that the trillions of ongoing auctions simply isn’t sustainable. The infrastructure costs to support publishers’ Manifest Destiny will drive their monetization partners out of business, forcing them to be further indentured to the walled gardens—and incur higher fees to add insult to injury.
At first, it may be hard for publishers to accept, and once again it will fall on SSPs to show how traffic shaping is working toward their clients’ benefit—namely driving them to high bidders. But this is the burden of playing an increasingly prominent role in a transforming industry—with the right tools, SSPs are going to force all players in the space to come together.